News Press Releases

GigaMedia Announces Second-Quarter 2019 Financial Results

GIGM | August 2, 2019

TAIPEI, Taiwan, Aug. 2, 2019 /PRNewswire/ -- GigaMedia Limited (NASDAQ: GIGM) today announced its second-quarter 2019 unaudited financial results.

Comments from Management

In the first half of year 2019, we continued devoting efforts to optimizing our product portfolio, building up brand strength and enhancing operational efficiency. For our business in licensed games, the successful launch of Senran Kagura: New Link in April has brought us a satisfactory amount of revenues in its introductory stage, while two underperforming games were terminated.

For in-house offerings, besides improving the existing self-developed games, we also have made progress in developing a new casual games platform, aiming to launch it in the second half of 2019. "As discussed in previous release guidance, we put emphasis on enhancing our in-house products. The direct investment into in-house product development was over $600 thousand in the first half of 2019, which was 9.5% higher than in the same period last year," said GigaMedia CEO James Huang.

We were also developing a customer platform, which will contribute to our operations in establishing relationships, saving marketing costs, and creating capacity for providing augmented products and services. "The customer platform is currently under small-scale test-run, but we believe the growing interaction of the customer platform and our wide range of diverse game offerings will generate synergistic effect for one another in the future," said CEO James Huang.

"The numbers might look similar as in prior quarters," stated CEO James Huang, "but the robustness is now exhibited in our operations, and momentums have gradually accumulated."

Second Quarter Overview

Operating revenues increased by approximately 18% quarter-on-quarter, to $1.8 million from $1.5 million last quarter, and 5.49% year-over-year from $1.7 million the same period last year. The increase was mainly attributable to Senran Kagura, a new game launched in April.
Gross profit increased slightly to $0.8 million from $0.7 million in the first quarter of 2019.
The net asset value was $5.15 per share.

Unaudited Consolidated Financial Results

GigaMedia Limited is a diversified provider of digital entertainment services. GigaMedia's digital entertainment service business FunTown develops and operates a suite of digital entertainments in Taiwan and Hong Kong, with focus on browser/mobile games and casual games.

Unaudited consolidated results of GigaMedia are summarized in the table below.

For the Second Quarter

GIGAMEDIA 2Q19 UNAUDITED CONSOLIDATED FINANCIAL RESULTS
(unaudited, all figures in US$ thousands, except per share amounts)	2Q19	1Q19	Change (%)		2Q19	2Q18	Change (%)
Revenues	1,750	1,483	18.00	%	1,750	1,659	5.49	%
Gross Profit	769	738	4.20	%	769	728	5.63	%
Loss from Operations	(1,122)	(949)	NM		(1,122)	(1,342)	NM
Net Loss Attributable to GigaMedia	(614)	(532)	NM		(614)	(755)	NM
Net Loss Per Share Attributable to GigaMedia, Diluted	(0.06)	(0.05)	NM		(0.06)	(0.07)	NM
EBITDA ^(A)	(1,000)	(876)	NM		(1,000)	(1,056)	NM
Cash, Restricted Cash and Cash Equivalents	58,015	58,494	-0.82	%	58,015	61,244	-5.27	%

NM= Not Meaningful

^(A)EBITDA (earnings before interest, taxes, depreciation, and amortization) is provided as a supplement to results provided in accordance with U.S. generally accepted accounting principles ("GAAP"). (See, "Use of Non-GAAP Measures," for more details.)

Second-Quarter Financial Results

Consolidated revenues for the second quarter of 2019 increased by 18% quarter-on-quarter to $1.8 million from $1.5 million in last quarter, and by 5.49% year-over-year from $1.7 million the same period last year, due to a boost from Senran Kagura, a new game launched in April that generated cash revenues of $1.0 million, where $0.4 million were deferred to next quarter in accordance with accounting requirements. Revenues from other games decreased mainly due to seasonality.
Consolidated gross profit was $0.8 million, slightly increased quarter-on-quarter and year-over-year. The gross margin rate was slightly lower due to initial costs incurred for the launch of a new game.
Consolidated operating expenses were $1.9 million, or increased by 12.1% the second quarter of 2019, comparable to that in last quarter, and decreased by 8.7% if compared to that in the same period last year, reflecting an increase marketing expenses for the launch of Senran Kagura, and certain general expenses incurred in this quarter.
Consolidated loss from operation of the second quarter of 2019 was $1.1million, an increase of $0.2 million loss from the first quarter of 2019.
Net loss in the second quarter of 2019 was $0.6 million, comparable to a net loss of $0.5 million in the first quarter this year, and slightly improved from a net loss of $0.8 million in the second quarter of 2018.
Cash, restricted cash and cash equivalents at the end of the second quarter of 2019 amounted to $58.0 million, slightly decreased by 0.8% from $58.5 million as of the end of the first quarter of this year.

Financial Position

GigaMedia maintained its solid financial position, with cash, restricted cash and cash equivalents amounted to $58.0 million, or $5.25 per share, as of June 30, 2019.

Business Outlook

The following forward-looking statements reflect GigaMedia's expectations as of August 2, 2019. Given potential changes in economic conditions and consumer spending, the evolving nature of digital entertainments, and various other risk factors, including those discussed in the Company's 2018 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission as referenced below, actual results may differ materially.

In the second half of 2019, we will continue to improve productivities of the existing games, in which the newly launched Senran Kagura and our female-oriented games are expected to contribute soundly to our revenues. We are also optimistic with the renovations of our in-house casual game offerings with customer platform, which will gradually accumulate to an upward trend for us.

"We are leveraging our deep expertise in self-developed games and creating an advanced framework for promoting customer relationships. We believe that loyal customer base will eventually help to boost in revenues and profits," stated CEO James Huang.

Meanwhile, our business strategies always include expanding through mergers and acquisitions. "We will also continue reviewing potential targets that would enable us to accelerate our growth and enhance shareholders' value," said CEO James Huang.

Use of Non-GAAP Measures

To supplement GigaMedia's consolidated financial statements presented in accordance with US GAAP, the Company uses the following measure defined as non-GAAP by the SEC: EBITDA. Management believes that EBITDA (earnings before interest, taxes, depreciation, and amortization) is a useful supplemental measure of performance because it excludes certain non-cash items such as depreciation and amortization and that EBITDA is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. EBITDA is not a recognized earnings measure under GAAP and does not have a standardized meaning. Non-GAAP measures such as EBITDA should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, other financial measures prepared in accordance with GAAP. A limitation of using EBITDA is that it does not include all items that impact the company's net income for the period. Reconciliations to the GAAP equivalents of the non-GAAP financial measures are provided on the attached unaudited financial statements.

About the Numbers in This Release

Quarterly results

All quarterly results referred to in the text, tables and attachments to this release are unaudited. The financial statements from which the financial results reported in this press release are derived have been prepared in accordance with U.S. GAAP, unless otherwise noted as "non-GAAP," and are presented in U.S. dollars.

Q&A

For Q&A regarding the second quarter 2019 performance upon the release, investors may send the questions via email to IR@gigamedia.com.tw, and the responses will be replied individually.

About GigaMedia

Headquartered in Taipei, Taiwan, GigaMedia Limited (Singapore registration number: 199905474H) is a diversified provider of digital entertainment services in Taiwan and Hong Kong. GigaMedia's digital entertainment service business is an innovative leader in Asia with growing capabilities of development, distribution and operation of digital entertainments, as well as platform services for games with a focus on mobile games and casual games. More information on GigaMedia can be obtained from www.gigamedia.com.tw.

The statements included above and elsewhere in this press release that are not historical in nature are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding expected financial performance (as described without limitation in the "Business Outlook" section and in quotations from management in this press release) and GigaMedia's strategic and operational plans. These statements are based on management's current expectations and are subject to risks and uncertainties and changes in circumstances. There are important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, including but not limited to, our ability to license, develop or acquire additional online games that are appealing to users, our ability to retain existing online game players and attract new players, and our ability to launch online games in a timely manner and pursuant to our anticipated schedule. Further information on risks or other factors that could cause results to differ is detailed in GigaMedia's Annual Report on Form 20-F filed in April 2019 and its other filings with the United States Securities and Exchange Commission.

(Tables to follow)

GIGAMEDIA LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
	Three months ended						Six months ended
		06/30/2019	03/31/2019		06/30/2018		06/30/2019		06/30/2018
		unaudited	unaudited		unaudited		unaudited		unaudited
		USD	USD		USD		USD		USD
Operating revenues
Digital entertainment service revenues		1,749,583		1,483,233		1,658,914		3,232,816		3,819,380
Other revenues		—		—		—		—		—
		1,749,583		1,483,233		1,658,914		3,232,816		3,819,380
Operating costs
Cost of Digital entertainment service revenues		980,448		744,901		930,421		1,725,350		1,877,109
Cost of other revenues		—		—		—		—		—
		980,448		744,901		930,421		1,725,350		1,877,109
Gross profit		769,135		738,332		728,493		1,507,466		1,942,271
Operating expenses
Product development and engineering expenses		325,144		320,494		300,635		645,638		589,806
Selling and marketing expenses		580,539		526,003		760,185		1,106,542		1,756,936
General and administrative expenses		974,648		835,987		1,003,359		1,810,634		1,899,863
Other		11,165		5,214		6,555		16,380		13,049
		1,891,496		1,687,698		2,070,734		3,579,194		4,259,654
Income (loss) from operations		(1,122,361)		(949,366)		(1,342,241)		(2,071,728)		(2,317,383)
Non-operating income (expense)
Interest income		414,450		381,799		338,602		796,250		617,546
Foreign exchange (loss) gain - net		90,922		(11,402)		246,830		79,520		87,917
(Loss) Gain on disposal of property, plant and equipment		—		—		31		—		31
Other - net		3,416		46,912		2,122		50,328		4,468
		508,788		417,309		587,585		926,098		709,962
(Loss) Income from continuing operations before income taxes		(613,573)		(532,057)		(754,656)		(1,145,630)		(1,607,421)
Income tax benefit (expense)		—		—		—		—		—
(Loss) Income from continuing operations		(613,573)		(532,057)		(754,656)		(1,145,630)		(1,607,421)
Net (loss) income		(613,573)		(532,057)		(754,656)		(1,145,630)		(1,607,421)
Less: Net loss attributable to noncontrolling interest						—
Net (loss) income attributable to shareholders of GigaMedia		(613,573)		(532,057)		(754,656)		(1,145,630)		(1,607,421)
(Loss) Earnings per share attributable to GigaMedia
Basic:
(Loss) Earnings from continuing operations		(0.06)		(0.05)		(0.07)		(0.10)		(0.15)
Loss from discontinued operations		0.00		0.00		0.00		0.00		0.00
		(0.06)		(0.05)		(0.07)		(0.10)		(0.15)
Diluted:
(Loss) Earnings from continuing operations		(0.06)		(0.05)		(0.07)		(0.10)		(0.15)
Loss from discontinued operations		0.00		0.00		0.00		0.00		0.00
		(0.06)		(0.05)		(0.07)		(0.10)		(0.15)
Weighted average shares outstanding:
Basic		11,052,235		11,052,235		11,052,235		11,052,235		11,052,235
Diluted		11,052,235		11,052,235		11,052,235		11,052,235		11,052,235

GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEETS

	06/30/2019		03/31/2019		06/30/2018
	unaudited		unaudited		unaudited
	USD		USD		USD
Assets
Current assets
Cash and cash equivalents		57,489,563		57,976,503		60,732,757
Marketable securities - current		—		—		—
Accounts receivable - net		591,905		589,520		672,143
Prepaid expenses		275,551		208,919		309,952
Restricted cash		525,354		517,815		511,710
Other receivables		458,383		375,192		335,119
Other current assets		131,150		127,377		121,693
Total current assets		59,471,906		59,795,326		62,683,374

Property, plant & equipment - net		92,580		100,148		173,051
Intangible assets - net		23,545		32,492		48,473
Prepaid licensing and royalty fees		574,274		383,681		1,043,823
Other assets		1,035,529		1,034,278		279,616
Total assets		61,197,834		61,345,925		64,228,337

Liabilities and equity
Short-term borrowings		—		—		—
Accounts payable		119,597		98,921		244,240
Accrued compensation		253,262		134,243		405,416
Accrued expenses		1,340,539		1,228,483		2,098,418
Unearned revenue		1,617,881		1,290,792		1,756,877
Other current liabilities		197,776		177,073		176,174
Total current liabilities		3,529,055		2,929,512		4,681,125
Other liabilities		781,187		779,919		—
Total liabilities		4,310,242		3,709,431		4,681,125
GigaMedia's shareholders' equity		56,887,592		57,636,494		59,547,212
Noncontrolling interest		—		—		—
Total equity		56,887,592		57,636,494		59,547,212
Total liabilities and equity		61,197,834		61,345,925		64,228,337

GIGAMEDIA LIMITED
RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS

	Three months ended						Six months ended
	06/30/2019		03/31/2019		06/30/2018		06/30/2019		06/30/2018
	unaudited		unaudited		unaudited		unaudited		unaudited
	USD		USD		USD		USD		USD
Reconciliation of Net Income (Loss) to EBITDA
Net income (loss) attributable to GigaMedia		(613,573)		(532,057)		(754,656)		(1,145,630)		(1,607,421)
Depreciation		14,769		25,388		25,563		40,156		49,017
Amortization		12,830		12,899		11,532		25,729		15,360
Interest income		(414,450)		(381,799)		(338,602)		(796,250)		(617,546)
Interest expense		—		—		—		—		—
Income tax (benefit) expense		—		—		—		—		—
EBITDA		(1,000,424)		(875,569)		(1,056,163)		(1,875,995)		(2,160,590)